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| Presented By Barclays Investment Bank |
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| Axios Markets |
| By Dion Rabouin ·Oct 21, 2020 |
| Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,094 words, 4 minutes.) 🎙 "Resentment is like drinking poison and waiting for the other person to die." - See who said it and why it matters at the bottom. |
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| 1 big thing: Why the stimulus delay isn't a crisis (yet) |
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| Illustration: Aïda Amer/Axios |
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| Breathless headlines have followed the impasse on a stimulus deal between House Speaker Nancy Pelosi and the White House but there has been a clear lack of urgency on both sides. - This has been in no small part because U.S. economic data have held up remarkably well in recent months thanks to the $2 trillion CARES Act and Americans' unusual ability to save during the crisis.
By the numbers: The median jobless worker received unemployment benefits "equal to 145% of their pre-job loss wages, compared to 50% in normal times" thanks to the CARES Act's $600-per-week unemployment supplement, a report from JPMorgan Chase & Co. Institute found. - Additionally, the creation of special pandemic unemployment programs allowed millions more out-of-work Americans to access jobless benefits, which amounted to 7% of total personal income in June — a record far exceeding the 1.3% peak during the Great Recession.
- Unemployed Americans "roughly doubled their liquid savings over the four month period between March and July 2020." The report notes, however, that they "then spent two-thirds of the accumulated savings in August alone."
The results: The percentage of people who said their ability to afford household goods had improved was the highest since early June in the latest Axios/Ipsos nationwide poll, tied for the best since the survey began in March. - U.S. retail spending rose for the fifth straight month to its highest level on record in September.
- And the average U.S. credit score improved during the pandemic, reaching the highest in July since FICO began keeping track in 2005.
The big picture: "The CARES Act worked. It delivered a massive amount of financial support and put a huge financial safety net under families very quickly," David Wilcox, senior fellow at the Peterson Institute for International Economics, tells Axios. - "And then Americans were smart — they did rational things that an economist would've told them to, which is to hedge against the possibility that that $600 benefit might not be a permanent thing."
Yes, but: A study of the pandemic's impact on food insecurity found that in April 22.8% of U.S. households were food insecure, and 34.5% of households with children. - For households with children, that's more than triple the rate economists had projected before the pandemic began.
What's next: The economy has held up much better than experts had predicted, but the numbers are starting to show strain. At worst, passing a stimulus bill would be a form of insurance on the recovery, Mike Fratantoni, chief economist of the Mortgage Bankers Association, tells Axios. - "If you listen to the public health experts, there is a real risk that we see a second or third wave and the course of the pandemic could get worse from here."
- "If you're a policymaker, having that insurance or risk management mindset makes a lot of sense right now."
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| Bonus chart: Staying current |
 Reproduced from National Multifamily Housing Council; Chart: Axios Visuals While headlines caution that 6 million people fell behind on their rent or mortgages last month, that number includes many who are supported by government forbearance programs, meaning they face no penalty for missing payments. One level deeper: The Mortgage Bankers Association found that 3.4 million mortgage payments were missed in September, but the group's own data also show 3.4 million homeowners were enrolled in federal forbearance programs that month. - Data from the National Multifamily Housing Council show that 94.6% of Americans paid their rent by month-end in September, nearly identical to the 95.5% who did so in September 2019, and October rent payments are tracking at similar levels to 2019 as well.
- Data on lower-income rental units show lower payment rates, but at numbers that are broadly in line with 2019, MBA's Fratantoni tells Axios.
"It's surprising to the extent that six months ago I would've expected to see much more distress, particularly on the rental side," Fratantoni says. |
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| 2. Catch up quick |
| Many of the state attorneys general who did not join the Justice Department's antitrust lawsuit against Google could later join the case and expand it to cover even more competition concerns. (Axios) Sen. Mitch McConnell told a group of Republicans that he has warned the White House not to make a stimulus deal with Pelosi before the Nov. 3 election. (Washington Post) Bank of England policymaker Gertjan Vlieghe backed the case for negative interest rates and signaled in a speech Tuesday that the bank plans to add more "monetary stimulus." (The Independent) Netflix's stock dropped nearly 6% in after-hours trading after reporting that it missed expectations on earnings and whiffed badly on global subscriber growth for the quarter. (Axios) |
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| A message from Barclays Investment Bank |
| Addressing a growing homeownership divide |
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| Barclays Research found rising income inequality in the U.S. is strongly associated with lower homeownership rates, especially in states with higher Black populations. What role should the government play in the mortgage market? Explore the report. |
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| 3. CEO confidence skyrockets on expectations of layoffs and wage cuts |
 Data: The Conference Board; Chart: Axios Visuals U.S. consumers remain uncertain about the economic environment but CEOs are feeling incredibly confident, the latest survey from the Conference Board shows. - Confidence among chief executives jumped 19 points from its last reading in July, rising above the 50-point threshold that reflects more positive than negative responses for the first time since 2018.
The big picture: Judging by their stated expectations, CEO confidence is not a good sign for workers. Over the next 12 months, CEOs said they expect to cut jobs, hold down employee pay and reduce capital spending. - 37% of CEOs expected to reduce their capital budgets in the year ahead, while 38% expected no change and 25% anticipated increasing spending.
- 34% expected a net reduction in their workforce, another 34% expected no change and just 9% expected an expansion of the workforce above 3%.
- 21% foresaw no increase in their employees' wages and 5% said they may reduce wages.
- 62% of CEOs expected little to no problems finding qualified workers, while 11% expected widespread talent shortages or hiring problems.
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| 4. Consumers are losing confidence around the world |
 Data: Morning Consult; Chart: Axios Visuals Consumers globally grew slightly less confident this week, continuing a trend evidenced over the past six weeks across the income spectrum, per data provider Morning Consult's Index of Consumer Expectations. - The poll surveys 11,000 adults per day in 15 countries.
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| 5. Google's search ad dominance is massive but shrinking slightly |
 Data: eMarketer; Chart: Axios Visuals Axios' Sara Fischer writes: Google is expected to net more than 71% of the U.S. search advertising spending this year, down from roughly 74.7% of market share in 2017, per eMarketer. Why it matters: Google relies on search advertising for the majority of its revenue. The Department of Justice's antitrust lawsuit over its dominance of search threatens the core of its business. Be smart: Over the past few years, Amazon has slowly started to give Google a run for its money in search advertising. - By 2021, it's expected to control nearly 16% of the search ad market, up from 6.5% in 2017.
- Still, Amazon's search ad business can only really grow in line with its e-commerce business, as most of the search ads bought on its platform are purchased by marketers trying to boost their products in search results on Amazon.com.
- And Google is pushing hard to compete with Amazon and other platforms in shopping.
Of note: This year, Google is expected to see its first advertising declines year over year in over a decade, due in large part to declines in ad spending by the embattled travel industry during the COVID-19 pandemic. |
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| A message from Barclays Investment Bank |
| New episode: The Flip Side podcast on U.S. housing reform |
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| Barclays Head of Research Jeff Meli and MIT Finance Professor Deborah Lucas debate what role, if any, Fannie Mae and Freddie Mac should play in the future of the U.S. housing finance market. Hear what they had to say in the latest podcast episode. |
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| Thanks for reading! Quote: "Resentment is like drinking poison and waiting for the other person to die." Why it matters: On Oct. 21, 1956, the late actress, writer and comedian Carrie Fisher was born. She is best known for playing Princess Leia in the Star Wars saga. Trivia time: Fisher was awarded a posthumous Grammy Award for Best Spoken Word Album in 2018. |
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